On March 22, 2016, Minister of Finance Bill Morneau tabled the
highly anticipated 2016 Federal Budget (the "Budget"),
the Liberal Government's first budget, entitled "Growing
the Middle Class".
We are pleased to provide our summary of tax measures contained
in the Budget.
The Budget proposed no changes to the general corporate income
tax rates or the Goods and Services tax rate. The proposed
corporate tax rate changes are focussed on the small business tax
rate by deferring the previously proposed rate reductions that were
to become effective in future years resulting in the small business
tax rate remaining at 10.5% after 2016 and proposing changes to
limit access to the small business deduction under certain
corporate and partnership structures. The federal corporate tax
rate applicable to personal services business income was increased
from 28% to 33%.
Other business tax changes of note were the repeal of the
eligible capital property regime and replacement of this regime
with a new capital cost allowance ("CCA") class, a
proposal to expand CCA classes for clean energy and conservation
equipment and the introduction of rules to clarify the tax
treatment of emission allowances.
International tax changes continue the Federal Government's
commitment to address base erosion and profit shifting and acting
on recommendations of the OECD. The proposed changes include the
introduction of country by country reporting for large
multi-national enterprises and new measures addressing cross-border
The Budget proposes no new individual tax rates or tax bracket
changes but changes had previously been announced on December 7,
2015 to reduce the income tax rate for the middle tax bracket and
introduce a new rate applicable to income in excess of $200,000. A
new Canada Child Benefit is proposed to replace the Universal Child
Care Benefit and Canada Child Tax Benefit. The family income
splitting tax credit and other tax credits are eliminated or being
A number of targeted changes are proposed to address tax
deferral or saving opportunities currently available in respect of
certain investment products and life insurance policies.
With respect to charitable sector changes, the Budget
unfortunately announced the Federal Government's decision not
to proceed with the capital gains exemption that had been proposed
in the 2015 Budget in respect of arm's length dispositions of
real estate or private corporation shares where cash proceeds from
the disposition were then donated to charity.
From a fiscal perspective, the Budget projects the 2016 deficit
to be $5.4 Billion (compared to a budget surplus of $1.4 Billion
that was projected in the 2015 Budget and a $3.0 Billion deficit
that was projected in November 2015) with a budget deficit of $29.4
Billion for 2017 to be followed by additional significant deficits
for a number of years to follow.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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